|UK Supreme Court
On 23 Oct 2019, the Supreme Court of the United Kingdom delivered a judgment that could affect anyone who works in R&D or in some other capacity in which he or she is likely to devise an invention. It could also affect an inventor who assigns his or her rights in an invention to his or her employer. Five justices of the Supreme Court found that an invention that had generated revenues of £24 million had been of such “outstanding benefit” for the inventor’s employer that the inventor deserved a payment of £2 million in addition to the salary and perks that he had received from his employment.
The case is known as Shanks v Unilever Plc and others and you can read all about it on the Supreme Court’s website and my case note, Employees’ Inventions – Shanks v Unilever of 28 Oct 2019 in NIPC Law. My note links to a press summary of the judgment and a video in which Lord Kitchin, who delivered that judgment, reads that summary.
The right to an additional payment known as “compensation” arises out of s.40 of the Patents Act 1977. Subsection (1) could affect you if you are employed in a capacity where you are likely to devise an invention. Subsection (2) if you are employed in some other capacity that entitles you to patent your invention but you sell or grant an exclusive licence to your patent or right to apply for a patent to your employer,
However, inventors can’t expect compensation in addition to their pay and benefits for any old invention. It has to be one that generates an “outstanding benefit” for the employer. That is to say, a benefit that is exceptional or stands out. That is not easy to prove. Not many employed inventors apply for compensation and most of the applications that are made fail.
The significance of the Supreme Court’s decision is that the Court made an award to the inventor even though £24 million is chicken feed to a multinational group of companies like Unilever. The inventor, who is now a visiting professor of electronics and electrical engineering in the University of Glasgow, had worked in R&D for a subsidiary of Unilever in the 1980s. He applied for compensation as long ago as 2006. He took his case to the Comptroller-General of Patents, Designs and Trade Marks who appointed an official known as a “hearing officer” to hear his plea.
One of the factors that the hearing officer had to consider under s.40 (1) was “the size and nature” of the employer’s undertaking. As Unilever, which makes everything from ice cream to deodorant is massive, the hearing officer could not say that £24 million was an “outstanding benefit” for that company. He dismissed the application. The inventor appealed to Mr Justice Arnold who agreed with the hearing officer. He then appealed to the Court of Appeal which agreed with the judge below and the hearing officer.
The inventor finally appealed to the Supreme Court which is the highest court of the United Kingdom. There Lord Kitchin, who had distinguished himself as a barrister of the intellectual property bar and later as a judge of the Patents Court and Lord Justice of Appeal, said that the hearing officer and the courts below had been looking at the words “the size and nature of the employer’s undertaking” the wrong way. The inventor had not been employed by the whole Unilever group but by a subsidiary that was responsible for R&D. The correct way to consider the issue was to compare the benefits that had accrued from the invention in this case with all other inventions in the field that had emanated from the same subsidiary. If that was done the £24 million benefit really did stand out and the inventor was entitled to a fair share of it.
The hearing officer had decided that 5% of the £24 million, which would have amounted to £1.2 million, was a fair share had he been able to make an award of compensation to the inventor and the Supreme Court agreed. However, as Unilever had enjoyed the use of that money for many years and as the value of that sum had been eroded by inflation the Supreme Court gave the inventor an uplift to £2 million. Mr Justice Arnold had said that corporation tax should be deducted from the £24 million but the Court of Appeal disagreed with him and so did the Supreme Court.
Lord Kitchin made clear that the methodology of assessing the benefit from the invention having regard to the size and nature of the employer’s undertaking did not apply to every case. Sometimes it is appropriate to consider the benefit in relation to the revenues of the whole company as was the case where an employee’s invention transformed the fortunes of the company. Each case depends on its own facts.
While it is still not easy for an inventor to recover compensation over and above his or her salary and benefits this case has undoubtedly removed some obstacles and clarified the law. Most applications for employee’s compensation start in the Intellectual Property Office where the procedure is less formal than a court and the costs that may be awarded against the unsuccessful party are considerably lower.
Anyone wishing to discuss this article or employee’s inventions generally should call me on 020 7404 5252 or send me a message through my contact form.